- Healthcare growth of 4% driven primarily by continued strength in
new products MENTOR, Ohio, Jan. 27 /PRNewswire-FirstCall/ -- STERIS
Corporation (NYSE: STE) today announced financial results for its
fiscal 2009 third quarter ended December 31, 2008. Fiscal 2009
third quarter revenues increased 2% to $319.5 million compared with
$314.0 million in the third quarter of fiscal 2008, driven by 4%
growth in the Healthcare business segment. Fiscal 2009 third
quarter net income was $28.6 million, or $0.48 per diluted share,
compared with net income of $21.8 million, or $0.34 per diluted
share, in the third quarter of fiscal 2008. During the third
quarter the Company continued its cost reduction efforts, taking
actions primarily related to its international operations, which
are anticipated to generate annualized savings of approximately $20
million. The Company anticipates that these savings will be
realized over the next several years, with approximately $4 million
benefiting fiscal 2009, approximately $10 million benefiting fiscal
2010 and the remainder in fiscal 2011 and beyond. As a result, the
Company incurred a net pre-tax charge of $12.3 million in the third
quarter. On the consolidated statements of income, $2.8 million of
this charge was recorded as restructuring expense and $9.5 million
was recorded in cost of goods sold. In addition, during the quarter
the Company made changes to certain benefit policies which resulted
in an additional $7.9 million in pre-tax income. Included in income
from operations for the third quarter of fiscal 2008 is a pre-tax
charge of $1.3 million primarily related to the transfer of
manufacturing operations from Erie, Pennsylvania to Monterrey,
Mexico. Excluding both the restructuring charge and the adjustment
for benefit changes, net of tax, fiscal 2009 third quarter net
income was $31.3 million, or $0.53 per diluted share. For the third
quarter of fiscal 2008, excluding the Erie/Mexico transfer, net
income was $22.6 million, or $0.35 per diluted share. The following
table outlines the impact of these items, which impact the
comparability of net income for the third quarter of fiscal 2009
relative to the same period in the prior year. (in thousands,
except per Three Months Ended December 31, share data) 2008 2007
Amount Diluted EPS Amount Diluted EPS Net Income as reported
$28,575 $0.48 $21,776 $0.34 Erie/Mexico Transfer, Net of Tax $- $-
$789 $0.01 Restructuring, Net of Tax $7,715 $0.13 $- $- Change in
Benefit Policy, Net of Tax $(4,948) $(0.08) $- $- $31,342 $0.53
$22,565 $0.35 "Like many in our industry, we saw the impact of the
broader economic issues affecting our top-line performance in the
third quarter. In particular, within our Healthcare segment, sales
for our infection control related capital equipment saw a slowdown.
However, our surgical products showed strong growth in the quarter,
driven by new products," said Walt Rosebrough, president and chief
executive officer of STERIS Corporation. "Substantial growth in
profitability was driven by the fine work of our people to improve
our efficiencies in conjunction with acceptance of our new products
by our Customers. We now believe that fiscal 2009 revenue growth
will be approximately 4%, while earnings will be toward the high
end of our range of $1.65 - $1.80." Quarterly Segment Results
Healthcare revenues in the quarter increased 4% to $230.2 million
compared with the third quarter of fiscal 2008. Contributing to
that growth, sales of capital equipment increased 6%, driven in
part by increased demand for the Company's new product offerings.
Service also reported solid growth in the quarter of 5%, while
consumables were up slightly compared to the prior year. Order
backlog levels at quarter end increased 25% to a record $133.9
million. Operating income was $32.4 million, an increase of 10%
compared with the prior year period, driven by increased volumes
and improved operating expense leverage. Excluding the
restructuring charge and the adjustment for benefit changes,
Healthcare operating income was $36.5 million. Life Sciences third
quarter revenues were $52.8 million, a decrease of 6% compared with
the third quarter of fiscal 2008. Solid growth in consumables and
service was more than offset by a 21% decline in capital equipment
revenues, which was driven by a continued slowdown in spending from
pharmaceutical customers. Order backlog declined 14% to $50.2
million compared with the prior year period. Life Sciences
operating income was $7.2 million in the quarter compared with $2.3
million in the third quarter of fiscal 2008. Operating income
benefited from increased gross margins and improved operating
expense leverage. Excluding the restructuring charge and the
adjustment for benefit changes, Life Sciences operating income was
$8.3 million. Fiscal 2009 third quarter revenues for Isomedix
Services were $34.6 million, a slight increase compared with the
same period last year. Revenue growth was affected by the sale of a
Chicago-area facility in the second quarter of fiscal 2009.
Operating income was $8.5 million compared with $7.0 million in the
prior year quarter. Excluding the adjustment for benefit changes,
Isomedix operating income for the third quarter of fiscal 2009 was
$7.7 million. Cash Flow Net cash provided by operations in the
first nine months of fiscal 2009 was $108.3 million, compared with
net cash provided by operations of $94.9 million in the first nine
months of fiscal 2008. The increase in cash from operations was
primarily driven by the increase in earnings. Free cash flow (see
note 1) for the first nine months of fiscal 2009 was $89.6 million,
compared with free cash flow of $60.5 million in the first nine
months of fiscal 2008. Free cash flow for the fiscal 2009 period
was impacted by the increase in earnings, lower capital spending
and the sale of an Isomedix facility during the second quarter,
which added $9.5 million to free cash flow. During the third
quarter, the Company repurchased 1,000,277 shares of its common
stock at an average price of $30.25 per common share for a total
amount of $30.3 million. During the first nine months of fiscal
2009, the Company repurchased 2,421,177 shares of its common stock
at an average price of $30.74 for a total amount of $74.4 million.
Approximately $204 million remains under the current share
repurchase authorization. Outlook Based upon fiscal year-to-date
performance and current anticipated trends for the remainder of the
year, the Company anticipates revenue growth of approximately 4%
for fiscal 2009, and earnings per diluted share, as reported,
toward the high end of the range of $1.65 - $1.80. This outlook
reflects certain assumptions and is subject to numerous
uncertainties, some of which are listed below: -- Revenue growth
for the full year is expected to be in the mid single digits in
Healthcare, the low single digits for Isomedix, and a slight
decline in Life Sciences. -- The Company has assumed the forward
exchange rates for the U.S. dollar and key international currencies
as of mid-December 2008. -- The Company is assuming a modest
increase in material costs. -- Operating margin, as reported, is
anticipated to be approximately 12.5% for the full year. -- The
anticipated effective tax rate is approximately 34% for the full
year. For the full fiscal year, free cash flow (see note 1) is now
anticipated to be approximately $110 million, and capital
expenditures are anticipated to be approximately $40 million.
Conference Call In conjunction with this press release, STERIS
Corporation management will host a conference call today at 10:00
a.m. Eastern time. The conference call can be heard live over the
Internet at http://www.steris-ir.com/ or via phone by dialing
1-888-392-9976 in the United States and Canada, and 1-517-645-6486
internationally, then referencing the password "STERIS." For those
unable to listen to the conference call live, a replay will be
available from 12:00 p.m. Eastern time on January 27, 2009 until
5:00 p.m. Eastern time on February 9, 2009, either over the
Internet at http://www.steris-ir.com/ or via phone by calling
1-800-756-3940 in the United States and Canada, and 1-402-998-0796
internationally. About STERIS STERIS Corporation is a leading
provider of infection prevention and surgical products and
services, focused primarily on the critical markets of healthcare,
pharmaceutical and research. The Company's more than 5,000
dedicated employees around the world work together to supply a
broad array of solutions by offering a combination of equipment,
consumables and services that enhance Customer productivity and
quality, and help make the world a safer place. The Company is
listed on the New York Stock Exchange under the symbol STE. For
more information, visit http://www.steris.com/. (1) Free cash flow
is a non-GAAP number used by the Company as a measure to gauge its
ability to fund future growth opportunities, repurchase common
shares, and pay cash dividends. Free cash flow is defined as cash
flows from operating activities less purchases of property, plant,
equipment and intangibles, net, plus proceeds from the sale of
property, plant, equipment and intangibles. STERIS's calculation of
free cash flow may vary from other companies. This news release,
and the conference call referenced here, may contain statements
concerning certain trends, expectations, forecasts, estimates, or
other forward-looking information affecting or relating to the
Company or its industry that are intended to qualify for the
protections afforded "forward- looking statements" under the
Private Securities Litigation Reform Act of 1995 and other laws and
regulations. Forward-looking statements speak only as to the date
of this report, and may be identified by the use of forward-looking
terms such as "may," "will," "expects," "believes," "anticipates,"
"plans," "estimates," "projects," "targets," "forecasts,"
"outlook," "potential," "confidence," and "seeks," or the negative
of such terms or other variations on such terms or comparable
terminology. Many important factors could cause actual results to
differ materially from those in the forward-looking statements
including, without limitation, disruption of production or
supplies, changes in market conditions, political events, pending
or future claims or litigation, competitive factors, technology
advances, actions of regulatory agencies, and changes in government
regulations or the application or interpretation thereof. Other
risk factors are described in the Company's Form 10-K and other
securities filings. Many of these important factors are outside
STERIS's control. No assurances can be provided as to any outcome
from litigation, regulatory action, administrative proceedings,
government investigations, warning letters, cost reductions,
business strategies, level of share repurchases, earnings and
revenue trends, expense reduction or other future financial
results. Unless legally required, the Company does not undertake to
update or revise any forward-looking statements even if events make
clear that any projected results, express or implied, will not be
realized. Other potential risks and uncertainties that could cause
actual results to differ materially from those in the
forward-looking statements include, without limitation, (a) the
potential for increased pressure on pricing that leads to erosion
of profit margins, (b) the possibility that market demand will not
develop for new technologies, products or applications, or the
Company's business initiatives will take longer, cost more or
produce lower benefits than anticipated, (c) the possibility that
application of or compliance with laws, court rulings, regulations,
regulatory actions, including without limitation the previously
disclosed FDA warning letter, certifications or other requirements
or standards may delay or prevent new product introductions, affect
the production and marketing of existing products, or otherwise
affect Company performance, results, or value, (d) the potential of
international unrest or effects of fluctuations in currencies, tax
assessments or rates, raw material costs, benefit or retirement
plan costs, or other regulatory compliance costs, (e) the
possibility of reduced demand, or reductions in the rate of growth
in demand, for the Company's products and services, (f) the
possibility that anticipated cost savings or other results may not
be achieved, or that transition, labor, competition, timing,
execution, regulatory, governmental, or other issues or risks
associated with the matters described in this release, and the
conference call referenced here, may adversely impact Company
performance, results, or value, (g) the effect of the credit crisis
on our ability, as well as the ability of our customers and
suppliers, to adequately access the credit markets when needed, and
(h) those risks described in our Annual Report on Form 10-K for the
year ended March 31, 2008, filed with the SEC on May 30, 2008,
under Item 1A, "Risk Factors." STERIS Corporation Consolidated
Condensed Statements of Income (In thousands, except per share
data) Three Months Ended Nine Months Ended December 31, December
31, 2008 2007 2008 2007 (Unaudited) (Unaudited) (Unaudited)
(Unaudited) Revenues $319,467 $313,974 $954,159 $889,920 Cost of
revenues 195,400 187,372 567,228 527,510 Gross profit 124,067
126,602 386,931 362,410 Operating expenses: Selling, general, and
administrative 67,272 82,015 231,910 249,929 Research and
development 8,122 10,173 24,469 27,963 Restructuring expense 2,855
952 2,726 3,041 Total operating expenses 78,249 93,140 259,105
280,933 Income from operations 45,818 33,462 127,826 81,477
Non-operating expense, net 2,848 935 6,211 2,572 Income tax expense
14,395 10,751 38,746 27,908 Net income $28,575 $21,776 $82,869
$50,997 Earnings per common share (EPS) data: Basic $0.49 $0.35
$1.41 $0.80 Diluted $0.48 $0.34 $1.39 $0.79 Cash dividends declared
per common share outstanding $0.08 $0.06 $0.22 $0.17 Weighted
average number of common shares outstanding used in EPS
computation: Basic number of common shares outstanding 58,660
62,995 58,889 64,073 Diluted number of common shares outstanding
59,347 63,836 59,790 64,931 STERIS Corporation Consolidated
Condensed Balance Sheets (In thousands) December 31, March 31, 2008
2008 Assets (Unaudited) Current assets: Cash and cash equivalents
$106,050 $51,868 Accounts receivable, net 215,883 249,814
Inventories, net 148,116 147,210 Other current assets 44,077 64,484
Total Current Assets 514,126 513,376 Property, plant, and
equipment, net 361,263 384,642 Goodwill and intangible assets, net
311,792 337,980 Other assets 7,730 3,294 Total Assets $1,194,911
$1,239,292 Liabilities and Shareholders' Equity Current
liabilities: Accounts payable $59,003 $75,532 Other current
liabilities 124,111 154,827 Total Current Liabilities 183,114
230,359 Long-term debt 210,000 179,280 Other liabilities 86,942
123,501 Shareholders' equity 714,855 706,152 Total Liabilities and
Shareholders' Equity $1,194,911 $1,239,292 STERIS Corporation
Consolidated Condensed Statements of Cash Flows (In thousands) Nine
Months Ended December 31, 2008 2007 (Unaudited) (Unaudited)
Operating Activities: Net income $82,869 $50,997 Non-cash items
50,606 36,900 Working capital adjustments (25,151) 7,048 Net cash
provided by operating activities 108,324 94,945 Investing
Activities: Purchases of property, plant, equipment, and
intangibles, net (29,704) (39,142) Proceeds from sale of property,
plant, equipment and intangibles 10,981 4,740 Equity investment in
joint venture (4,150) - Net cash used in investing activities
(22,873) (34,402) Financing Activities: Proceeds from the issuance
of long-term obligations 150,000 - (Payments) proceeds under credit
facilities, net (79,180) 31,925 Payments on long-term obligations
(40,500) (500) Deferred financing fees and debt issuance costs
(476) (443) Repurchases of common shares (80,466) (94,758) Cash
dividends paid to common shareholders (12,981) (10,910) Stock
options and other equity transactions, net 42,020 14,131 Net cash
provided by (used in) financing activities (21,583) (60,555) Effect
of exchange rate changes on cash and cash equivalents (9,686) 3,104
Increase in cash and cash equivalents 54,182 3,092 Cash and cash
equivalents at beginning of period 51,868 52,296 Cash and cash
equivalents at end of period $106,050 $55,388 STERIS Corporation
Segment Data (In thousands) Three Months Ended Nine Months Ended
December 31, December 31, 2008 2007 2008 2007 (Unaudited)
(Unaudited) (Unaudited) (Unaudited) Segment Revenues: Healthcare
$230,177 $220,451 $682,078 $622,826 Life Sciences 52,787 56,305
157,977 155,330 STERIS Isomedix Services 34,642 34,555 108,476
104,820 Total Reportable Segments 317,606 311,311 948,531 882,976
Corporate and Other 1,861 2,663 5,628 6,944 Total Segment Revenues
$319,467 $313,974 $954,159 $889,920 Segment Operating Income
(Loss): Healthcare $32,406 $29,343 $94,334 $68,873 Life Sciences
7,151 2,337 14,426 5,975 STERIS Isomedix Services 8,453 7,025
26,851 21,827 Total Reportable Segments 48,010 38,705 135,611
96,675 Corporate and Other (2,192) (5,243) (7,785) (15,198) Total
Segment Operating Income $45,818 $33,462 $127,826 $81,477 STERIS
Corporation Non-GAAP Disclosures (Unaudited) (In thousands, except
per share data) The following tables present financial measures
which are considered to be "non-GAAP financial measures" under
Securities Exchange Commissions rules. The Company has referred to
results of operations excluding restructuring charges and a change
in a benefit policy in order to provide meaningful comparative
analysis between the periods presented. Free cash flow is defined
by the Company as cash flows from operating activities less
purchases of property, plant, equipment and intangibles, net
(capital expenditures) plus proceeds from the sale of property,
plant, equipment and intangibles. The Company uses free cash flow
as a measure to gauge its ability to fund future growth
opportunities, repurchase common shares, and pay cash dividends.
STERIS's calculation of free cash flow may vary from other
companies. Nine Months Ended December 31, 2008 2007 (Unaudited)
(Unaudited) Calculation of Free Cash Flow from continuing
operations: Cash flows from operating activities $108,324 $94,945
Purchases of property, plant, equipment, and intangibles, net
(29,704) (39,142) Proceeds from the sale of property, plant,
equipment, and intangibles 10,981 4,740 Free Cash Flow from
Continuing Operations $89,601 $60,543 The following tables
reconcile reported net income to net income excluding restructuring
charges and a change in a benefit policy: Three Months Ended
December 31, 2008 2007 Amount Diluted EPS Amount Diluted EPS Net
Income $28,575 $0.48 $21,776 $0.34 Erie/Mexico Transfer, Net of Tax
$- $- $789 $0.01 Restructuring, Net of Tax $7,715 $0.13 $- $-
Change in Benefit Policy, Net of Tax $(4,948) $(0.08) $- $- $31,342
$0.53 $22,565 $0.35 Three Months Ended December 31, 2008 Segment
Operating Income (Loss) Excluding Restructuring Charges and an
Adjustment for Benefit Changes: Change in As Restructuring Benefit
Reported Charges Policy Total Healthcare $32,406 $9,958 $(5,850)
$36,514 Life Sciences $7,151 $2,385 $(1,227) $8,309 STERIS Isomedix
Services $8,453 $- $(768) $7,685 Total Reportable Segments $48,010
$12,343 $(7,845) $52,508 Corporate and Other $(2,192) $- $(71)
$(2,263) Total Segment Operating Income $45,818 $12,343 $(7,916)
$50,245 Three Months Ended December 31, 2007 Segment Operating
Income (Loss) Excluding Restructuring Charges and an Adjustment for
Benefit Changes: As Erie/Mexico Reported Transfer Total Healthcare
$29,343 $1,285 $30,628 Life Sciences $2,337 $- $2,337 STERIS
Isomedix Services $7,025 $- $7,025 Total Reportable Segments
$38,705 $1,285 $39,990 Corporate and Other $(5,243) $(5,243) Total
Segment Operating Income $33,462 $1,285 $34,747 DATASOURCE: STERIS
Corporation CONTACT: Julie Winter, Manager, Investor Relations of
STERIS Corporation, +1-440-392-7245 Web site:
http://www.steris.com/ http://www.steris-ir.com/
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